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The Papers of Charles Hamlin (mss24661)
366_04_001-




Hamlin, Charles S., Scrap Book — Volume 230, FRBoard Members




P05.001 - Hamlin Charles S
Scrap Book - Volume 230
FRBoard Members

6

BOARD OF GOVERNORS
OF THE

FEDERAL RESERVE SYSTEM

Office Correspondence
To
From

The Files

•
Date August 6, 1941

Subject:

Mr. Coe

After correspondence with Mrs. Hamlin (see letters of May
25 and June 4, 1941) the items attached hereto and listed below, because of their possible confidential character, were taken from Volume 230 of Mr. Hamlin's scrap book and placed in the Board's files:
VOLUME 230
Page 15
Confidential letter to Governor Calkins from Governor Harrison
re open market operations.
Page 53
Letter to Senator Glass re draft of amendment to F.R. Act.
Page 73
Confidential - Preliminary Memo for the Open Market Policy Conference July 14, 1932.
Pagejv_79 & 8a
(X-7199) Tentative Draft - Discounts for Individuals and Corporations.
Page 84
Earnings and Expenses of Federal Reserve Banks, June 1932.
Page 85
Analysis of New Paragraph of Section 13 of the F.R. Act as provided for by Section 210 of H.R. 9642 as amended and passed
by the Senate on July 11, 1932.
Page 88
Letter to Senator Glass re Section 13 of F.R. Act.
Page 89
Memo to Board re operating efficiency of F.R. Banks.
Page 111
Report of Carl P. Dennett, Chairman of the Banking and Industrial
Committee of the First Federal Reserve District.
Page 119
Memo to Board from Mr. Wyatt re Comments of Chairman and Governors
of F.R. Banks on July 16 Draft of Circular re Discounts for
Individuals, Partnerships and Corporations.
Page 137
Memo to Mr. Hamlin from Mr. Wyatt re Glass Amendment to so-called
relief bill.




RURAL

41
(

\ SfREW ,0141(

July 5, 1932.

COMPI:ENTIAL

Dear lovernor Calkins:
In view of the chunges in the,-;ystem position resulting from gold losses,
recent bank disturbances, and mid-year events, it seems desirable to review recent
open market operations in their relation to the present position of the System
and the general banking sitwAion.
Since Februar

24 the government security holdings of the system have

been increased by .t'1,060,000,000, including some purchases by the FederA. Reserve
Bank of Chicago for its own account durin.7 last week.

The disposition of the funds

put into the market through these purchases nny be tabulFsted as follows:
DisitionofFundsi_m211ablebsecadurit?urchases
(In millions of dollars)
Net loss of gold through exports and earmarking
Repayment of discount6 of Federal reserve banks
Reduction in Federal reserve bill holdings
Increase in money in circulation
Increase in member bank reserve balances
Total

430
365
69
57
156
1,077

The difference between these fi7ures end the fi5rures for movernment purchases is wide up by

number of miscelle.neous items.

This t7;ble indicates that the turtle mode evailabl

by security purchases

were largely absorbed by heavy losses of gold and by a reduction in Federal reserve
discounts and bills.
able to for

Only a relatively anall remainin/mount has been m de avail--

excess member bank reserves which might support an increase in member

bank credit.
Axring this period the excess gold reserves of the System have been
reduced from $1,392,000,000 to :942,000,000, tht is a decline of $450,000,000,
VOLUMF 230
PAGE 15



a\

2

Governor Call

7/5/32

3

and the combined reserve ratio of the System has declined from 68 per cent to
57 per cent.

It is interesting to observe, however, that only a very small part

of this change in the System's gold position and the reserve ratio is attributable
to purchases of government securities.

Most of it has been due to the repatri-

ation of foreign central bank dollar funds, which very probably would have occurred regardless of the policy of the System.

The country's gold stock has

declined as shown in the above table ;430,000,000, or only t20,000,000 less than
the decline in the excess gold reserve of the Federal reserve banks.

Had there

been no increase in the System government holdings this gold loss would necessarily have been accompanied by considerable increase in Federal reserve bank
discounts over and above the discounts held at the time security purchases were
commenced. In other words member bank borrowings in the Reserve banks instead
of declining from $835,000,000 to $470,000,000, would most surely have been increased to well over $1,000,000,000, in addition to some increase in acceptances,
and the drastic credit deflation in process in February inevitably would have
been accelerated as a consequence.
Thus we see that the open market program

was

not only effective in pre-

venting the increase in discounts which would have followed such large gold exports, but on the contrary was responsible for a substantial reduction of discounts in spite of such gold losses.

Most of the increase in reserve funds

resulting from security purchases has been required to meet demands for reserve credit which had to be met in some form.

Whether that reserve credit was provided by

purchases of government securities, by rediscounts, or by bill purchases, the effect upon the gold position and the reserve ratio would be precisely the same.

The

reserve ratio is now less than 2% under what it would have been had no securities
been bought, and that 2% difference is accounted for by the fact that our open
market operations have increased reserve credit about 4125,000,000 in excess of




overnor

3

Ce

7/5/32

.ne

excess rethe 0-ctLal demend, and member banks hold approximately this mount of
serve deposits.

The required reserve against these excess deposits accounts for

the difference in the reserve ratio.

These excess reserves are, of course,

support
available to meet any demand for currency or gold Which may arise or to
an expanstion of member bank credit about ten times the amount of the excess.
The following table gives these figures in detail.
(In '4illions of Dollars)
Y. R. Credit:
U. S. Securities held
Discounts
Bills bought
Other Y. R. credit
Total F. R. credit

Tune 29

lime

741
835
133
25

1,801
470
84
11

+ 1,060
365
89
14
-

1,734

2,346

612

Feb. 25

Principal Demands for F. R. Credit:
Reduction in U. S. gold stock
Net increase in currency circulation
Total increase in demand
laces. of increase in F. R. credit over increased demand
Increase in member bank and other deposits in F. R. banks

430
57
487
125
134

posiApart from the effect of open market operations on the technical
of the more 7enera1
tion of the System it is important briefly to summarize some
results of the System's purchases of securities:




Cl)

The very large repatriation of foreign central bank funds
has been accomplished without any strain on the position
of member banks, and thus one important obstacle to a
more normal credit position has been removed.

(2)

The pressure for liquidation of bank credit which usually
results from the indebtedness of member banks has been
materially lightened by a reduction in their total
borrowings from more than $800,000,000 to leas than
$500,000,000.

4

Governor C,

ins

7/5/32

(3) The decline in member bank deposits has been checked,
and the liquidation of bank credit which had been
proceeding at an alarming rate has been substantially
retarded.
The alternative to purchases of government securities would have been
a large increase in member bank indebtedness which would have exerted still
further pressure towards liquidation, the continuance of which at the rate it
was proceeding in February might well have been disastrous.
With the gold outflow apparently checked except for the export of some
*20,000,000 during the next three weeks, about which we shall write you, the
only factors which appear likely to influence the System's reserve position in
the near future are changes in the currency demand, and changes in member bank
reserve balances. If there Should be a farther increase in the currency demand
the form in which the Federal reserve credit is supplied will make no difference
in the effect on the System's reserve position.
Member bank reserves have recently fallen short of the 250 to 300
million of excess which it was proposed to maintain, as pointed out in the minutes of the last meeting of the executive committee.

In the absence of a return

flow of the currency that has recently gone out, it would require the purchase
of about $125,000,000 more Government securities to restore member bank reserves
to that level. Even such an amount would reduce the reserve ratio of the System
by only about 1 1/2 points, from a little over 57 per cent to slightly under 56
per cent.
it

SOOMB

If excess member bank reserves should now be restored to that basis

likely that they will for tha first time have an opportunity to exert

their full force unless or to the extent that gold exports or currency hoarding
should revive.

In any event there is now more reason to expect that when excess

reserves are restored they can be maintained until bank credit begins to expand -




5

Governor Celkins

7/5/32.

the real objective of the policy which the System inauFurated in the spring.
While the recent experience shows th'It the purchases of government
securities do not adversely influence the position of the reserve banks as a
whole, they may affect the position of individual reserve banks, and the present
situ?tion in which a number of the Reserve banks have percentages of about 50 per
cent whereas others have considerably higher percentar,es, clearly requires reconsideration of the allotment of securities as a necessary accompaniment of a
further program of security purchases.

7ve have already received a number of com-

ments on the letter and tables mailed to all the Reserve banks on June 24, and
shall write you further when more arc, received.
Very truly yours,

George L. Harrison,
Governor.

Vs. John U. Calkins,
lovernor, Federal Reserve Bank of San Francisco,
San Francisco, Cal.

Enc.




•••J

111

COPY

July 9, 1932.

personal and Confidential.

Dear Senator Glass:
i am sending you this confidential note enclosing a hastily
prepared draft of amendment to the Federal Reserve Act, giving the Federal
reserve banks, in emergencies, the power to loan directly on eligible paper,
exactly as they can now purchase eligible trade acceptances. Of course it
will be clained that the banks will be deluged, but t do not believe this
at all. I firmly believe, but cannot prove, that there are many merchants
in the United States today who are unable to obtain credit, althou01 they
can give satisfactory collateral. t know that there are large areas where
there are no banks left. I therefore, personally, would favor giving this
power in emergencies to Federal reserve banks.
It is clear that practically all the central banks of Europe have
this power today, and t do not believe it will be disastrous to extend this
to the Federal reserve banks under the control of the Federal Reserve Board..
i enclose a list of central banks which have this power to deal direct with
individuals.
Sincerely yours,

Hon. Carter Glass,
United States Senate,
Washington, D. C.

VOLUME 230
PAGE 53




=TRai BANKS 'MICK 7,T111,23. WI am
ass AMTHOTIITY TO MAn LOANS TO
INDIVIDUALS OR ZS,* AU NOT OPIIMI
CALLY PROHIDITM AN! DOING 30.
Kisch and akin (1930)

Ccmonwealth Bank of Australia

Page 166

National Bank of Austria
a
a
II

173-4

a " Bolcium

u

181-2

" " Dulcaria

a

169-90

n

"

Czodhoslowlida

At

2.:2-3

Bank of DansiG

a

2324

National Bank of Oopenhacen

tt

240-1

Bank of Paigland

Si

11

a

" Elstonio

It

"Finland

243

252-3

a

261

a " France

a

264.5

German Reichsbank

t!

271-2

Bank of Greco°

u

281

National Bank of Hun,-;ary

o

292..3

Banos dlItalia

a

301.2

Bank of Japan.

n

310-1

Bank of Latvia

u

317-6

Bank of Lithuania

a

324-5

Netherlands Bank

a

330.1.

Norgos Bank

n

336.7




1

Bank of Paw&

Pt.i.o 352-3

National Bank of Runaztia

•

362-3

Bank of ,32ain

•

380-1

Swedish Riketani:

•

38443

R

393,04

Swiss ;Iational Bank




BE IT =ACTED BY THE SMATE AND MUSE OF REPRMENTATIVES OF THE UNITED STATES
OF AMERICA IN CONGRESS ASSEMBLED, That Section 13 of the Federal Reserve Act,
as amended, is hereby further anended by. adding at the end of the seccnd
paragraiih taereof a new paragraph reading as follows:




"In unusual and exigent circumstances, the Federal
Reserve Board, by the affirmative vote of not less than
five members, may authorize any Federal reserve badk,
S uring such periods as the said Board may determine, at
rates establidhed in accorcionce with the provisions of
Section 14, subdivision (d) of this Act, to discount for
any individual or corporation, notes, drafts and bills of
exchangp of the kinds and maturities made eligible for
discount for member banks under other provisions of this
Act, when such notes, drafts and bills of exchange are
indorsed and otherwise secured to the satisfaction of the
Federal reserve bank; provided, that before discounting
any such note, draft or bill for an individual or
corporation the Federal reserve bank shall obtain evidence
that such individual or corporation is unable to secure
adequate credit accaamodations fran other banking
institutions. All such discounts for individuals or
corporations Shall be subject to sudh limitations,
restrictions and regulations as the Federal Reserve Board
may prescribe. No note, draft or bill of exdhange discounted under the provisions of this paragrajh shall be
eligible as collateral security for rederal reserve notes."

....1100

6).

•

•

Pt

,Le,L

COIIFIDENTIAL

ME' OPEN 1/131:ET POLICY COTIFERaTCE
.E0R

PREL31:INOY

JULY 14, 1932.

The results of purchases of government securities by the System since
March were reviewed in a letter of July 5 from the chairman of the Conference to
the governors of all Reserve banks.

This letter indicated that the funds made

available by security purchases had been largely used to enable banks to meet
.gold losses and to repay indebtedness at the Reserve banks, and that only a
relatively small amount rumained to provide excess reserves.

In the absence of

purchases of governmcnt securities there would have been a considerable increase
in borrowings at.the Reserve bianks and a continuation of the drastic credit deflation which had been going on.
to the effect on the Reserve System the purchases of government securities were a very snall influence upon the reserve position of the Federal
reserve banks, the declines in reserve ratios over this period being due almost
•
altogether to gold losss:s rather than to purchases of governments.
The general results of the Systamls purchases of socuritic;s were summarized as follows:
"(1)

The very large repatri:_tion of foreign central bank funds
has been accomplished without any strain on the position
of mmber banks, and thus one important obstacle to a
more normal credit position has been ramovcd.

2

The pressur

for liquidLtion of bank credit which usually

results from the indebtedness of mmber banks has been
materially lightened by a reduction in their total borrowings from more than $800,000,000 to less than $500,000,000.

"(3)

The decline in member bank deposits has been checked) and
the liquidation of bank credit which had been proceeding at
an alarming rate has been substantially retarded."

VOLUME 230
PAGE 73



2

All of these results are real accomplishments in themselves
and have probably avoided very serious consequences of continued or
increased credit liquidation.

Nevertheless the ultimate purpose of

bringing about an increase in the volume of bank credit, which might
in its turn influence business activity has not yet been achieved
for the results so far accomplished are not such as would be expected
to exercise a very direct or affirmative influence upon business
activity.

It, therefore, seems desirable at this time to review the
s

general business and industrial situation as a basis for determining
the extent to which further purchases of government securities would
be likely to prove effective.

Production, Trade, and Employment

A further decline in the volume of production and trade and
in numbers of workers employed is shown by the available figures for
May and June.

Indexes commonly used to measure fluctuations in busi-

ness now show greater declines than this country has ever before

experienced. The depressions of the 70s and the 90s brought with
them nothing approaching the cessation in activity which occurred
in recent months.

The following table shows the percentage decline

in production in this recent period compared with the decline in
other important depressions:




•

•

•."

3
Declines in Industrial Activity *
(Computed normal = 100)

Date
Tan. 1873
Feb. 1892
Jan. 1906
Jan. 1920
Apr. 1923
June 1929

Actual Data
114.6
113.9
112.6
111.2
115.2
114.7

Decline

Low Point

High Point

Date
Feb.
Jan.
May
Apr.
July
June

Actual Data

1878
1894
1908
1921
1924
1932 (est.)

P.31. Cent

87.3
80.1
81.9
73.0
87.3
50.6

24
30
27
34
24
56

* From index published by Cleveland Trust Company.
The total number of wholly unemployed workers in the United
States is now estimated at about 10,000,000, an inorease of about
3,000,000 to 4,000,000 from a year ago.

This is more severe unem-

ployment than we have ever before experienced in this country and
constitutes a major social and economic problem for it carries with
it the threat of social disturbance and radical legislation.

To

bring about reemployment before winter is the problem which faces
the country.
Looked at from the point of view of business and finance
the problem is almost equally pressing, for a continuation of the
present restricted volume of business activity over an extended
period of months would man the bankruptcy of many business concerns




including many railroads, and the insolvency of many banks.

Favorable Factors
Fortunately, at this point a nutter of the principal obstacles to business and financial improvement have been removed.
The practical completion of the removal of foreign short time balances from our money market has removed a threat to our gold position.

Domestic gold hoarding has practically stopped.

A tax bill

has been passed by Congress which it is hoped will place the budget
in approximate balance.

The relief bill with added powers to the

Reconstruction Finance Corporation will probably soon be passed.
The reparations agreement has been signed at Lausanne.

Definite

settlement has been effected of a number of individual domestic
situations which threatened to prove disturbing.

The bonus bill

and a number of other unsound legislative proposals have been defeated.

Business has effected many readjustments in costs and ha

begun to evidence a more hopeful sentiment.
Already the course of financial events has begun to reflect these favorable developments.

The bond market, and particu-

larly the market for foreign bonds, has shown improvement as indicated in the following figures:




1932
Low
Standard Statistics corporation bond average 57.45
Baker-Kellogg foreign bond average
54.22
* July 8 figure

July 11,
1932
60.19
59.58*

•

•

•
4

Basic commodity prices, after a month of approximate stabilization, have
begun to show improvement as indicated by the following figures for principal basic
commodities.

Low
Wheat, cash, at Minneapolis, per pound
Corn, cash, at Chicago, per pound
Hogs, average, per hundredweight
Steers, average, per hundredweight
Hides, per pound
Sugar, raw, per pound
Cotton, middling, New York, per pound
Wool, per pound
Silk, per pound
Rubber, smoked ribbed sheets, per pound
Copper, electrolytic, per pound
per pound
Pig iron, per ton
Finished steel, per pound
Scrap steel, Pittsburg, per ton
Petroleum, crude, per barrel

The establishment of banking and industrial committees in the different
Federal reserve districts should also be listed as among the favorable factors, for
they provide machinery available to carry out in the several districts any plans
agreed upon for industrial and financial rehabilitation.

Capita/ Goods Industries Most Depressed
In considering the effectiveness of various means which may be employed
for stimulating employment or industrial activity, consideration may well be given
to the variation between different industries as to their extent of activity and
employment of workers.

These figures which are shown in full in the tables at the

end of this memorandum, show that the greatest cessation of activity has been in
the basic industries producing what may be termed capital goods.

This my be

illustrated by the following index figures for activity in different industries.




•

_•

5

Industry
Pig iron
Steel
Bituminous coal
Cement
Lumber

Percentage
of Computed
Normal
20
23
48
44
33

As contrasted with these figures production of the following consumption
goods may be listed:

Industry
Boots and shoes
Hosiery
Live stock
Wheat flour
Sugar
Tobacco

Percentage
If Computod
Normal
87
67
83
78
56
79

The whole group of industries classified under producers goods in the
index compiled by the Federal Reserve Bank of New York are operating at 49 per cent
of computed normal, whereas the industries classified under consumord
operating at a rate 77 per cent of computed normal.

goods are

Unemployment and wage figures

support this same general conclusion, that the greatest cessation in activity and
the greatest amount of unemployment has taken place in the capital goods industries;
that is, those industries which produce for the use of other industries primarily,
and the activities of which are largely financed through the capital market.
The extrem depression in these industries appears to reflect, first, som
over-production of capital goods in the years just before the depression, and second
tho disorganization of the bond market to a point where new financing has become
practically impossible, and capital is no longer available for business even at
prohibitive prices.
long-term capital.



What is most required to revive these basic industries, is cheap

•

•

•

6

The surveys thus far conducted by banking and industrial committets in
a number of districts appear to indicate that there are a considerable number of
sound enterprises which can go forward as

on as capital is available upon

There are three principal fields in Which these enterprises now

moderate terms.
appear:
(1)

Building Construction.

Mille there has been over-production of

office buildings and high class apartments there is a considerable demand for
cheap apartments and moderate-priced private dwellings, and for modernization of
old buildings.
(2)

Modernization of existing industrial facilities to keep pace with

recent inventions and improvements.
(o)

Public and semi-public projects.

In addition to these three major forms of capital goods there appear to
be many other small enterprises in 'Which a more adequate supply of capital and of
bank credit would find profitable employment if it were available upon moderate
terms.

In the consumption industries also stocks are low and trade is retarded

by shortages of capital and credit.

Function of the Banks
In the furnishing of both credit and capital to business the banks
occupy the key position.

For the past year and a half the banks have not only de-

creased greatly their extensions of credit to business but also have withdrawn
large amounts of funds from the capital market as illustrated in the following
figures for weekly reporting banks:




(In millions of dollars)
Dec. 31,
1930

July 6,
1932

7,814
8,449

4,632
6,484

2,992
3,701

4,210
3,206

22,956

18,532

Loans:
On securities
All other loans
Investments:
U. S. securities
Other securities
Total loans and investments

•

than Governments
By their decrease in investments in secures other
in this
anS their decrease in loano upon securus these banks have thus withdrawn
whereas ordinarily the
period nearly four billion dollars from the capital market,
a year in
banks of the United States pour into this market about a billion dollars
those two forms.
In recent weeks since the Reserve System began its policy of vigorous
purchases of government socuritiJs there has boon sone change in this tendency.
and the
Bank credit as a Whole stopped its rapid decline and tended to level out
contribution of the banks to tho capital market showed a similar tendency until
used
the latter part cf Juno when bank disturbances and mid-year and holiday demands
up most of the surplus reserves and caused scne resumption in the ducline in credit.
Any program for meeting the present emergency must dopund upon two forcos
for increasing business activity and employment;

first, the natural stimulation

which will arise from a general improvement in tho security market and in the b
ness and financial situation generally, end second, tho stimulation of activity
through the ugoncies of the government.

The problem has now become so acute and

the time has become so short that it has now been generally agreed that artificial
methods are necessary.

The arcial methods used appear to depend upon the

S8 rticular form of the relief bill which Congress may adopt.

In any event such a

S ill is likely to require a considerable amount of additional government financing,
the floating of which on the murkot during coming months is essential to the entire
program.

Along with this governmental program it is to be hoped that r. natural re-

covery in the security. markets and in prices and business itself may be accompanied
by an increased use of the normal channels of financing.

To achieve both of these

purposes vigorous support by the banks of the country is essential, and an increase
in bank credit.




11

a

APPM\IDIX

CHANGES IN MPLOY1‘.= AND PAYROLLS BETWEEN MAY 1929 AND MAY 1932
(1923-1925 averaEe = 100)
Employment
1929
May
Iron and steel
Machinery
Textiles
Food products
Paper and printing
Lumber and pr oduc ts
Transportation equipment
Automobiles
Loather and products
Cement, clay, and glass
Nonferrous metals
Chemicals
Petroleum refining
Rubber products
Tobacco products




1932
May

Payrolls
1929
May

111.6
57.2
100.7
II
I
131.9
54.4
119.1
99.3
62.0
97.3
103.1
81.0
97.3
114.3
83.8
102.8
92.8
6
38.
89,2
nei.o
52.4
101,5
147.1
59.7
130,0
88.1
90.3
'I
91.8
47.0
93.1
123.1
51.4
105.3
113.1
78.3
110.3
114.4118.9
146.5
66.0
115.3
86.1
67.3
90.3

1932
May
30.4
35.9
41.5
72.9
77.0
22.2
45.9
53.5
45.7
30.2
34.5
66.9
72.5
48.7
48.4

9
.INDEX2S OF PRODUCTION
(Conputod normal = 100)

1929
May ,

1932
May.

1932
June

Pig iron
Steel ingots
Lead
Zinc
Tin
METALS

114
121
112
113
141
131

22
24
43
35
48
31

20
23

Cotton consumption
tool mill activity
Silk consumption
TEXTILES

109
102
101
105

55
38
60
51

Bituminous coal
Coke
Petroleum, crude
Cement
Lumber
Newsprint paper
Cotton receipts
Wheat receipts
OTHER PRODUCERS GOODS
TOTAL PRODUCERS GOODS

110
120
112
115
104
98
103
92
103
113

52
40
72
44
33
79
109
73
66
49

Items

32
48
-

1111100••••••

48p

Ort.

MO

•••••••••
Ole
•••••111110

lInthracite coal
Petroleum products
Boots and shoes
Finished cotton goods
Hosiery
Knit underwear
Livestock
Wheat flour
Sugar
Tobacco
Farm produce
TOTAL CONSUMERS GOODS

•p

preliminary




90
101
111
116
108
115
93
108
80
112
96
103

52
67
87
53
67
84
96
78
56
79
92
77

40p

83

4

3,0.1

fo

•
J.0

INDEXES OF _ BUSINESS ACTIVITY
(Computod normal

100)

1932

Items

1929
Ea7

1932
Tune

Carloadings, mdse. and misc.
Carloadings, other
Exports
Imports
W..terway traffic
Wholesale trade
PRILLARY DISTRIBUTION GROUP

104
111
102
115
113
103
106

56
42
50p
60p
34
76
57

55
38

Department store sales
Chain grocery
Other chain
1ail order
Advertising
Automobile registrations
DISTRIBUTION TO CONSUMER GROUP

101
104
107
116
102
115
105

76
77
78
75
59
31p
70

Life insurance
Postal receipts
Electric power
Corporations formed
GENERAL GROUP

99
101
107
101
102

73
69
68p
83
68

TOTAL VOLUME OF DISTRIBUTION OF GOODS

105

65

Production of producers goods
Production of consumers goods
Automobile production
Employment
Building construction
PRODUCTIVE ACTIVITY GROUP

113
103
136
105
115
110

49
77
37
64
31
57

TOTAL VOLUME OF PRODUCTION AND
DISTRIBUTION OF GOODS

106

63

New York City debits
s sold on N. Y. Stock Exchange
pital issues
in grain futures
CIAL GROUP

130
237
130
98
130

57
56
14
48
44

debits

107

63

LUHE OF TR;JE

106

61




minary

4WD

41.

OW

OW

WO

.1

OW

OW

1•111

/Oa

.1

WO

••••••••••

ONO

OW

f_2_13

59

4.0

S

lt-i-t,
t-te "1-41.-44
X-7199

(TENTATIVE DRAFT - Intended only as basis for discussion and not
recommended for approval.)
July 14, 1932
SUBJECT:

DISCOUNTS FOR INDIVIDUALS AND CORPORATIONS.

TO ALL FEDERAL RESERVE BANKS:
The third paragraph of Section 13 of the Federal Reserve Act,
as amended by the Act of July

, 1932, provides as follows:

"For a period of two years in unusual and exigent
circumstances, the Federal Reserve Board, by the affirmative vote of not less than five members, may authorize any
Federal reserve bank, during such periods as the said board
may determine, at rates established in accordance with the
provisions of section 14, subdivision (d), of this Act,
to discount for any individual or corporation, notes, drafts,
and bills of exchange of the kinds and maturities made eligible
for discount fcr member banks under other provisions of
this Act when such notes, drafts, and bills of exchange are
indorsed and otherwise secured to the satisfaction of the Federal reserve bank: Provided, That before discounting any such
note, draft, or bill of exchange for an individual or corporation the Federal reserve bank shall obtain evidence that such
individual or corporation is unable to secure adequate
credit accommodations from other banking institutions. All
such discounts for individuals or corporations shall be subject
to such limitations, restrictions, and regulations as the
Federal Reserve Board may prescribe. No note, draft, or bill
of exchange discounted under the provisions of this paragraph
shall be eligible as collateral security for Federal reserve
notes."
In view of the exceptional and unusual nature of the power conferred upon the Federal reserve banks by this provision, and in view of the
limited period during which it is effective, the Federal Reserve Board has
not prescribed any formal regulations governing the exercise of this power;
but the requirements of the law and the procedure which the Federal Reserve
Board will expect to be followed are outlined below for the information
of the Federal reserve banks and any individuals or corporations who may
apply to them for discounts.
VOLUME 230
PAGE 79



-2.

I.

X-7199

LEGAL LIMITATIONS.

It will be observed that, by the express terms of the
above provision of law:
1.

Federal reserve banks may discount eligible paper for

individuals and corporations only:
(a)

In unusual and exigent circumstances,

(b)

Within two years from July

(c)

When authorized by the affirmative vote of

, 1932,

not less than five members of the Federal
Reserve Board, and
(d) During such periods as the Federal Reserve Board
may prescribe;
2.

They may discount for individuals and corporations only

notes, drafts and bills of exchange of the kinds and maturities made
eligible for discount for member banks, under other provisions (Sections
13 and 13a) of the Federal Reserve Act.
3.

Such paper must be indorsed and otherwise secured to the

satisfaction of the Federal reserve bank;
4. Before discounting paper for any individual or corporation,
the Federal reserve bank must obtain evidence that such individual or
corporation is unable to obtain adequate credit accommodations from
other banking institutions;
5.

Such discounts may be made only at rates established by the

Federal reserve banks, subject to review and determination by the Federal
Reserve Board;




- 36.

X-7199

Paper discounted for individuals and cor)orations is not

eligible as collateral security for Federal reserve notes; and
7.

All discounts for individuals or corporations are su,ject to

such limitations, restrictions, and regulations as the Federal Reserve
Board may prescribe.
II.
1.

PERMI'lSIOY OF THE FEDERAL RES7aVE BOARD.

Permission to disco-nt eligible notes, drafts, and bills of ex-

change for individuals and corporations will be granted by the Federal Reserve Board only upon written apthcation of a Federal Reserve Bank containing a full statement of the exceptional and exigent circumstances which, in
the judgment of the Board of Directors of the Federal reserve bank, justify
such action.
2.
Federal

Such permission will be ,:_;ranted for neriods soecified by the
eserve Board, not excec?ding six months; but annlications for re-

newals of extensions of the Board's permission will be accepted and considered
at any time during the two weeks nreceding the expiration of an existing
authorization.
3.

Requests for renewals or extensions of such permi-sion must be

made in the same manner as an ori,Tinal anplication.
III.
1.

ELIGIBILITY.

7".'.en authorized by the Federal Reserve Board, the Federal reserve

banks may discount for individuals or corporations, eligible commercial,
industrial and agricultural papor actually owned by such individuals or
corporations and bearing their indorsement.
2.

In order to be eligible for such discount, notes, drafts and

bills of exchange must comnly as to maturity and in all other resoects




—4,

X=7199

with the provisions of Section 13 or Section 13(a) of the Federal
Reserve Act and with the applicable requirements of the Board's Regulation
A.
IV.

APPLICATIONS FOR DISCOUNT.

Each application of an individual or corporation for the
discount of eligible paper by the Federal reserve bank must be made
in writing on a form furnished for that purpose by the Federal reserve
bank and must contain, or be accompanied by, the following:
1.

A statement of the circumstances giving rise to the

application and of the purposes for which the proceeds of the discount
are to be used;
2.

A statement of the efforts made by the applicant to obtain

adequate credit accommodations from other banking institutions, including
the names and addresses of all other banking institutions to which appli—
cation for such credit accommodations has been made, the dates upon which
such applications were made, whether such applications have been definitely
refused and the reasons, if any, given for such refusal;
3.

Financial statements of the applicant and the principal

obligors on the paper offered for discount;
4.

A list of all banks with which the applicant has had banking

relations, either as a depositor or as a borrower, during the preceding
year, with the approximate dates upon which such banking relations
commenced and terminated;




5.

Evidence sufficient to satisfy the Federal reserve bank as to,

a.

X7-7199
—5—
(a) the legal eligibility

of the paper offered for discount and (b) its

acceptability from a credit standpoint;
6. A list and description of the collateral or other security
offered by the applicant; and
7. An agreement by the applicant, in form satisfactory to the
Federal reserve bank, (a) to furnish to the Federal reserve bank when
requested, additional financial statements, copies of recent auditorst
reports, and other credit information, and (b) to submit to audits,
credit investigations and examinations by representatives of the
Federal reserve bank, whenever the Federal reserve bank shall so desire.
V.

GRANTING OR REFUSAL OF APPLICATION.

Before discounting notes, drafts, or bills of exchange for
any individual or corporation, the Federal reserve bank shall ascertain
to its satisfaction by such means as it may deem appropriate:
1.

Whether any member bank located in the territory served by

such applicant is willing to grant the credit accommodations for which
application has been made to the Federal reserve bank;
2.

Whether the applicant is unable to obtain adequate credit

accommodations from other banking institutions;
3.

The financial condition and credit standing of the

applicant and the need for the credit accommodations applied for;
4.

Whether the paper offered for discount is acceptable

from a credit standpoint and eligible from a legal standpoint;
5.

Whether the security offered is adequate to protect the

Federal reserve bank against loss; and




- 6 _
6.

X-7199

That the proceeds of such discount will be used for a purpose

which would give rise to paper which would be eligible for discount under
other provisions of the Federal Reserve Act, if offered by member banks.
In discounting paper for individuals or cornorations, a Federal reserve bar_k should not make any commitment

to renew or extend such paper or

to grant further or additional discounts. '
1
VI.

LIMITATIONS.

No Federal reserve bank shall discount for any one individual or
corporation paper amounting in the aggregate to more than one per cent of
t;rie paid in capital stock of such Federal reserve bank.
VII.

ADDITIONAL REQUIREMENTS.

Any Federal reserve bank which obtains permission from the Federal
Reserve Board to discount eligible paper for individuals and corporations
may issue a circular prescribing such additional requirements and procedure
respecting such transactions as it may deem necessary or advisable; provided
that it is not inconsistent with the provigions of the law and the Board's
regulations and with the terms of this letter.




By order of the Federal Reserve Board.

Chester Morrill,
Secretary.

(Preliminary Rough Draft)

00
IOARD ==m
N8
118
====e2ii
DISC PUNTB i7 =g)
=
III
:
lUt
z2======
=
.

I. STATUTORr

The third paragraph of Seotion 1$ of the Federal Reserve
Act, as amended by the Act of July

* 1932, provides as follows*

"For a period of two yew* in unusual and exigent
circumetancos* the Federal Reserve Board, by the affirmative vote of not less than five members* may authorize any
Federal reserve bank* daring such periods as the said ooard
ger determine, at rates established in ascordance with the
provisions of section 14, subdivision (d), of this Act,
to disoount for any individual or corporation, notes, drafts,
and bills of exohmmge of the kinds and maturities mad.: eligible
for discount for member banks unctzer other provisions of
this Act *when suoh notes* drafts, and bills of exchange are
indorsed and otherwise secured to the satisfaction of the Fed-.
eral reserve bank: Provided, That before discounting any
such notea draft, or bill of exchange fOr an individual or
corporation the Federal reserve bank shall obtain evidence that
such individual or corporation is unable to secure adequate
credit aceemmodations fr.Aaother banking institutions. All
such discounts for individuals or corporations shall be subject
to suoh limitations, restrictions and regulations as the
Federal Reserve Board may prescribe. No notes draft, or bill
of exchange di/sot:ranted under the provisions of this paragraph
shall be eligible as collateral security for Federal reserve
notes,"

IlAugosiammir
The eligibility of notes, drafts* and bills of orohange for
redisoount, when offered by member banks* is pverned by the provisions of
Seotions 15 and 13(a) of the Federal Reserve Act and by Regulation A of
the Federal IA•surve Lioard; and, in order to be eligible for discount when
offered by individuals or corporations, such paper must comply as to
maturity and in all other respects with those requiremmts and, in addition
thereto must oemply with the requirements of the third paragraph of Section
13* quoted above* and with this Regulation.
VOLUME 230
page 83




itted to make
The Federal Reserve banks will not be jerm
or oor)orations but only
direct loans or advanoes to individuals
such individuals or corporations,
to discount, upon the indorsement of
by law and regulations, eligible
and within the limitations prescribed
paper actually owned by such
coinercial, industrial mad agricultural
inAittiMals or oorporaticns.
D.
III. PERMISSION OF THE FEDERAL R::RVE B1AR
drafts, and bills of
Permission to disoount eligible notes,
ions will be ;ranted by the Federal
exehanre for individuals and corporat
ion of a Federal Reserve Bank
Reserve Board only upon written applicat
lution of its Board ..)f Directors
a000mpanied by a certified copy of a reso
ement of the exceptional and
containing a complete end definite stat
ment of the Board of Directors
exigent circumstances which, in the judg
ifies such action.
of the Fed,)ral reserve bank, just
definite periods of time
Such pernisstion will be grant d only for
Federal Reserve Board at any time.
.„nt will be subject to revocation by the
,
permission must be
levests for renewals or extensions of such
ication.
made in the same manner as an original appl
a period in excess of six
No such permisSion will be granted for
of
months, but applications for renewal

xtensions of the Board's per-

od at any time during the two weeks
mission will he eeespted and eonsider
existing authorisation.
qr4seding the elmiration of an

IT.

APPLICATIONS FOR DISCCMIT.

al or corporation for the
Nish application of an individu
Fe eral Reserve bank sust be filed
discount of eligible paper by the
reserve
for that purpose by the Federal
in writing on a fora furnished



*Wit lad Mit eontain, or be aocompanied by the followings
Is A statement of the ciroumetanoes giving rise to the
applicatida and of the purposes for which the prooeede of the discount
are to be used;
2. A statenent of the efforts made by the applicant to obtain
adequate credit a000mmodations from other banking institutions, including
the manes and addresses of all other basking institutions to which application for such credit a000mmodations hes been made, the dates upon 'thick
suCh applications were mode, whether such applications have been definitely
refused and the reasons, if any, given for such refusal
3. Financial statements of the applicant and of all nakers,
drawers, acceptors, endorsers, sureties, and guarantors on the paper
offered for disoount;
4. A list of all banks with which the applicant has aad banking
relations, either as a depositor or as a borrower, during the preceding
five years, with the approximate dates upon which such banking relations
commenood and terminated;
6. Evidence sufficient to satisfy the Federal reserve bank as to
(a) the legal eligibility of the paper offered for discount and (b) its
acceptability from a credit standpoint; and
6. A list and description of the collateral or other seourity
offered by the applicant.
The application and all statements made by the applicant,
inoluding his financial statement, mist be verified by affidavits, and all
other financial statements supporting the application, must be supported
by affidavits.



V. INVESTIGATION BY FEDERAL RESERVE BANK.
Before granting spy discount to an individual or corporation,
a Federal reserve bank shells
1. Consunioate with every bank to which the applicant has
applied for such credit accommodations and obtain from each such bank
a report as to (a) the truth of the statements made bir the applicant,
(b) itelber such credit accomodations were in fact refused, and (o)
If so, the reasons for such refusal.
2. Furnish to each bank with which the applicant has had
banking relations during the preceding five years and to each member bank
located in the territory served by such applicant a copy of the application
and supporting documents and obtain frosteach such bank a statement as to
whether such bank is then willing to grant to such applicant the credit
a000mmidatiome for lila he has applied to the Federal reserve bank.

VI. MIAMI* Op IMINBAL OF DINDOMT•
No Pelona reser,* bank shall discount notes, drafts, or bills
of exchange for ma individual or a corporations
1. if ow other bank bas advised the Federal reserve bank that
it is willing to extend adequate credit accommodations to the applicant;
2. lithe paper offered for discount is not clearly acceptable
fros a oredit standpoint WI veil as eligible from& legal standpoint;
3. Unless the sesarity offered is entirely adequate to protect
the Foderal reserve bank against lose

in view of the fact that the

Federal r,,serve bank woad not have the proteotion of the endorsement of a
menber bank;




4«

If avg material statement rode Iv the applies,* la Ms

applioation or asr sutrortiryi liseilment is found to be false; or
6. Unless the finael iSimitsieents of the applioant and of
the prineipal obligors at the paper offered ter disoount disclooe a
reasonable *mess of Tisk assets ever sweat liabilities.
Ja disocunting paper for imdividaale

I esrporations, a

Federal reserve bank shall emter into no oommittimMOIAMAMmWer as to
the renewal or extension of suah pa-per or as to the speating of further
or additional di...aunts*
IMECTATIMIS
In detersdaing ~thee to diesount paper for individuals esd
esrperations, the federal reserve blahs shall have des regard to ths
probable future needs of their own member bash*, and. 20 Federal reserve
bleak shAll disoommt paper for aw individeel or corporation vdmat its
eau reams essamit to less than filly' per sent of its own wregegb,
liabilities for 44.1411itli and Arderel voisne wimps in actual eireulatiom4
The 041r0$160 smut striver diseommted tiv

Fcderal reserve

Usk fer eerparatimel end liettivideals *hall at as Was easesi

GMOunt

4101pia to the paid." aid isitipired capital and surplus of seek Federal
reserve bask*
No Federal reseratisitsball disoount for amy imdtvideal or
essipisvatiesi paper amsmuttng is the iimpesite Ito ster• that ono per out
000 emits' of suet Federal room bast.




VIII. RATE OF RISMNT.
Discounts kor individuals and corporations shall be
made
by Yeasral reserve ,a,r0cs only at special rates estab
lished by the
'Board of directors 01: the Asderal reserve bank for that
purpose,
The Federal li.eserve i3oard will not

prove any rate established for

this purpose which is less than, (a) 2,* per annum above the
current
rate at which the ied)ral reserve bank disoounts stroller
paper for its
member banks, or (b) six per cent, whiohever is the
grater.




C ONFIDENTIAL
Not for publication

3-811
EARNINGS AND EXPENTES OF FEDERAL RESERVE BAIIKS, JUTE 1932

Federal
Reserve

Discounted
bills

Purchased
bills

U. S.
securities

Other
sources

Jan. - June 1932
Current net earnin,7s
Less accrued
dividends and
Ratio
net charges
to
Total
Ratio to
(current)
to
Total Daid-in
cppital profit and loss
capital
Per cent
Per cent
$621,549
10.8
$95,262 10.1
$2c: ,736
3,20 ,695
4,935,346 15.5
956,011 19.6
1,265,599
20.9
1,709,521
251,030 19.6
1,156,182
22.6
1,615,618
220,168 18.6

19_32
June
Current net
Current expenses
earnings

of

Month
Earnings from

Total

Exclusive
of cost of
F.?.currency

Total

$246,835

$10,274 $141,291 $9,005
49,351 1,039,695 146,966
137,252 19,765
13,580
236,465 22,285
13,927

1,494,286
412,420
425,r:in

$144,016
511,256
140,629
197,785

$151,523
536,275
151,390
205,513

7,987
5,413
18,790
4,660

68,251 7,992
71,904 14,778
344,707 55,533
86,499 5,515

157,085
189,888
517,255
134,790

111,366
93,602
257,955
107,099

111,930
98,522
288,920
108,051

45,155 10.5
91,36 22.9
228,345 15.1
2.6,729 7.3

290,702
42'=:,733
1,481,620
119,378

11,0
17.3
17.0
5.3

133,335
277,375
948,212
-26,057

2,643
30,859
Minneapolis
3,575
70,279
as City
3,619
40,074
as
15,901
265,503
San Francisco
TOTAL
1,396,968 149,730
June 1932
1,417,181 169,044
May 1932
407,969 120,687
June 1531
7.932 11,451,151 2,013,849
1931 2,759,704 1,155,651
FEDERAL RESERVE BOARD •
'DIVISION OF BAIT OPERATIO7S
JULY 12, 1532.

84,843 2,548
73,432 30,435
56,554 3,051
142,505 1.6,955

120,903
177,722
103,406
441,8551

73,552
129,187
90,729
181,538

74,946
131,890
90,812
182,347

45,957 19.2
45,832 13.7
12,596 3.9
259,518 29.3

213,`187
258,433
107,255
1,685,841

14.6
13.1
5.4
30.6

123,931
140,570
-19,394
1• ,330,166

2,535,518 337,962 4,422,198 2,046,956
2,456,046 190,262 4,232,553 2,040,235
897,925 371,852 1,798,633 2,108,007
11,437,424162,439 26,384,863 12,375,109
6,460,513 939,946 11,336,054 12,767,672

2,132,229
2,109,566
2,143,358
12,907,580
13,567,250

13,477,283
-2,251,196

17.3

6,604,561
-6,256,051

Boston
7ew York
Philadelpia
Cleveland
Richmond
Atlanta
Chicago
St. Louis




$86,315
256,264
191,803
150,963
72,855
97,793
97,135
38,115

2,289,969
2,122,965
-344,725
13,477,283
-2,251,196

18.0
15,2
17.3

VOLUME 230
PAGE 84

abf--(441.
C).01.4.044
PtPAAPH

ANALY
AL PROVInl) _

;',ECTI2N 13 :)F THE FEDERAL RESERVE ACT

311.;11 .1i 210 of H.R. 9642 AS AMENDED AND PASSED

BY THE ',:ENATE a& 'VII 11 (C,'ILE,72k,. DAY JULY 12), 1932.

At any time durink; the next two years, when in the
judgment of the Federal heserve ioard, unusual wld exigent circumstances exist, it may, by the affirmative vote of not less than
five of its members, authorize any ?ederal reserve bank to discount
notes, drafts, or bills of exchange for any individual or corporation,
subject to the following conditions and limitations:
(a) In order to be eligible for discount for an individual
or corration, a note, draft or bill of exchange must be of suoh
a kind and r:f such a.naturity that it is eligible for discount for
a -ember bank under the existing provisions of the Federal Reserve
Act, except that the indorsement of a member bank is llot required.
(b) Such discounts may be made only during such periods
is may be determined ;the Federal Reserve Joard; but, during
any such period, it is Aot necessary for any Federal reserve bank
so authorized to obtain the Board's consent in each °a e before
discountini; paper for an individual or corporation.

Upon the ex-

piraLion of any soh period no further discou-Its for an i_dividual
or corporation may be made unlesL and until the _doard, uy the
affirmative vote of five ..conlbers, has extended such period or again
granted perdission for such discounts.

If it should so desire, the

Federal Reserve 3oard might require that its permission be obtained
in each case before the discount of paper for an individual or
VOLUME 230
oor orati,".
PAGE 85



(0 The rates at which such disoounts may be ma& shall
be established fronting) to time by the Federal reserve banks,
subject to the review amd derimandmatian

or the

Fed3ral 'Amery.

Board, and shall be rimed with a view of &accommodating oommeroe
and business.
(d) A mote, draft or till of emehemis dismounted for an indiFederal
vidual er eorperstioa mere be indoresd tolls* Satisfaction of the
reserve bank. as imdersement *Mother of a temiter otherwise is
sufficient, if szAisillatory to the Federal reserve bunk. If wudh
note, draft or bill eitemsbauga /las been aoquired framer bears
be discouatod
ladereeeemt or signets.* at a MoMmeiser bank it may not
und,:lr
emeept in oases aim" it may be, diseemeted for a member bank
existinc U.
(e) A. notevdraft or bill discounted for an individual or ()corsecured
poration nust net only be indorsed but must also be otherwise
reetrie.
to the satisfaction of th,t discounting Federal reserve bank. No
tion as to the kind or class of security is provided.
(f) Such a note, draft or bill may be disco:sated only when
the Federal reform bank has obtained evidence that the individual
.: is unable to
or corporation for which such discount is to be nad,
other
secure adequate credit aocommodations from bankine institutions
than Federal reserve bank's.
(i) All such discounts shall be scdideot to such libe
restrictions and regulations as the Velma iteeersellaerd




reseribe.

.3—

(h) No such mote, draft or bill of ccohange disoount3d
for an individual or corporation shall be eligible as collateral
security for Federal reserve notes.




64A

July 13, 1932

honorable Carter Glass,
United States Senate,
Washington, D. C.
Dear Senator Glass*
At a meeting of the Federal Reserve Board held this
afternoon, 1 was requested to suggest to you that wherever the words, "individual or corporation" occur in the
new amendment to Section 13 of the Federal Reserve Act,
the following be substitute& "For any individual, partnership, association or corporation",
was very glad that you approved the suggestion that
WiernOr

lieyer be relieved of his dutiea as Chairman of the

heconstruction Finance Corporation and I sincerely hope you
will be able to arrange this. The Governor is very much
fatigued and his associates feel that he should be relieved
of the work on this Corporation which he has done so well.
ancerely yours,

P. S. I enclose a memorandum showing just where the chankAs
above suggested should be made.
VOLUME 230
PAGE 88




COPY

•
June 23, 1932.

To Federal Reserve Board
From Mr. Smead

Subject: Operating efficiency of Federal
reserve banks.

Attached hereto is a cony of our usual annual statement, covering the
year 1931, on output per employee and output per unit of cost in the principal
operating departments at the head offices of the Federal reserve banks.
As compared with 1925, the first year for which these data are available,
output per employee, for the head offices atrial Federal reserve banks combined,
was approximately 37 per cent higher in 1931, while output per unit of cost was
27 per cent higher.

The aaaller increase in output per unit of cost is

accounted for by the fact that the average salary paid clerical employees in
these departments increased from $1,351 in the first half of 1925 to $1,486
in the first half d1931.

The increased output per employee is directly

reflected in the fact that, although there has been a substantial increase in
the volume of work handled, the number of ennloyees in these principal departments declined. from 3,550 in 1925 to 2,943 in 1931, or by 607*.

The average

number of employees in 1931 in the operating units for which a measurement
of
volume of work is available, 2,943, was about 50 per cent of the total number
of clerical employees at the head offices of the reserve banks.

The cost

figures shown in the attached statement represent the cost of handling work
in
the operating units of the departments exclusive of administrative costs.
It will be noted from the statement that both output per employee and
output per unit of cost increased substantially in 1931 as compared with
1930,
which is a relatively good showing considering the fact that the volume of
work
declined somewhat in 1931. It will also be noted that, in a few of the smaller
VOLUME 230
PAGE 89



-2—

units, there was an abnormal change in the volume of work handled.

This is

due in some cases to a change in operating procedura or method of reporting.
For example, in 1931 the Federal Reserve Bank of Minneapolis began handling
grain

drafts for local banks in the City Collection departments. As these

items are handled in practically the sane manner as checks, and since it was
possible to handle such items without increasing the personnel, the increase
in output per employee shown for this unit does not measure the Change in
relative efficiency In handling these items during the year.

Similarly,

the increase in the number of City Checks (clearings) at the Federal Reserve
Bank of New York, and the corresponding decrease in the number of City Checks
(other than clearings), is due largely to a change in the Manual of
Instructions governing the preparation of functional exnense reports, as a
result of which items collected through suburban clearing house associations
are now counted as City Checks (clearings) rather than as City Checks (other
than clearings). Items reported as City Checks (other than clearings) are now
limited to those collected by messenger.
Expenses as reported in the functional expense reports, form E, are not
published by the Board, the published expense figures being classed merely
according to object of expenditure as shown in current expense reports, form
96. According to these current expense reports, the salaries of clerical
employees declined $556,000 between 1925 and 1931.

This decline was

approximately offset by an increase of $324,000 in officers' salaries and
of $222,000 in salaries of "other employees," largely building employees,
cafeteria employees, guards, etc. The increase in "other employees" resulted




•
largely from the moving of a number of branches out of rented ouarters into
buildings constructed by the Federal reserve banks for their use. Between 1925
mi 1931 there was a decrease in total current exoense, exclusive of cost of
currency, of $164,000, and in total current expense, including the cost of
Federal reserve curreicy, of $487,000.

*Of the decrease of 241 in the number of em-aloyees in these departments in
1931 as c =pared with 1930, approximately 70 was due to a decline in the
volume of work and the remainder to an increase in the output -oer employee.




Report of Carl P. Dennett, Chairman of the Banking.and Industrial
Canmittee of the First Federal Reserve District,
dated Jul457. 12, 1932.

Analysis.

Reports received from 142 Committees, representing approximately 40% of
the population of the Union:

1. Banks unable or unwilling to grant sound loans for business
purposes other than real estate loans:
Yes 27. (19)
No. 115.
von.•••••••••

2. Are there any projects, canmercial, industrial, or municipal,
that are held up for lack of credit? Would they be
executed if credit from some source outside were made available?
Yes 17. (12=A
No. 325.
WON.WO MO

3. Is there a sound basis and need for additional housing facilities?
Yes 11. (76%)
No 133.
111Mia••••••sal

4.

What is the situation with respect to real estate loans?
Answer: Difficult or impossible with reference to
obtaining money on real estate mortgages.
Yes 79. (60%)
NO 51.
mob

VOLUME 230
PAGE 111



.•••••

2.

5.

Is outside capital required for real estate loans?
Yes 24. (18%)
No 106.
00••••mara•

In arellyzing these reports, it is astonishing to find a lack of
complaint with reference to credit conditions. There are some exceotions,
but generally speaking, there is no complaint about the credit conditions
in New England.




Real Estate Situation.

6. Are building and loan associations in your section in
position to loan money on sound mortgages?
No 19. (704)

24s 94
••••••••••••=0

7. Is there any considerable demand for real estate loans which
can not be satisfied with present facilities?
Yes 21. (75%)
7.
No
,
..
01111more

8. Is there any need for additional housing facilities in your
section?
Yes 4. (15%)
No 23.

9. Is there a demand for souna real estate loans for repair
purposes on existing homes?
Yes 22. (78%)
6.
No
Mame..




•
10.

Would any considerable number of new homes be built if loans
could be arranged on a sound basis, - say 600
Yes 6. (22%)
No 21.

Summary.

1, 19% declare instances of banks unable or unwilling to grant
sound loans for business purposes other than real estate
loans.

2. 14 state that there are projects, commercial, industrial, or
municipal, that are held up for lack of credit which
would be executed if credit fran same source outside were
made available.

3. 78% state that there is a sound basis and need for additional
housing facilities.

4. 60% state that the situation as to real estate loans is difficult
or impossible with reference to obtaining money on
real estate mortgages.

5. 18% state that outside capital is required_ for real estate loans.

Real Estate Situation.

and loan associations are not in
6. 70% report that building
position to loan money on sound mortgages.

7. 75% report that there is a considerable demand for real estate
loans which can not be satisfied with present facilities.

8. 15% report that there is need for additional housing facilities.




9. 78% report that there is a demand for sound real estate loans
for repair purposes on existing homes.

10. 22% report that a considerable limber of new homes would be
built if loans could be arranged on a sound basis, say 64010.

R usi+•
alava..4.23Dui

1.

July $26
T91

Prom

RfsptrIts roard

Subject* Gemasnte et OWJemaa
uld governor* at Federal rile:wive
*u =July
11 Draft ot Circular re
on
Disesunts ter Individualsn Partasorehipe
and Corporation**

1ter ttlat o General ceAnsol.

•

Sim et 'elle roJeral reserve banks (Cleveland. Attlantao chieages,
Sto Louis, Dillas smd San Promisee) and Deputy (*moor Witt of the
TedersiBesorTe 15krA of PhilodelPhis

ther stated that they were *satisfied with

the draft of the oiroular regarding disomanUt ter individuals° partnerships
0r ivvporations sent to tbWaioa4uly les 1933 (xfr9014) irt suggested 110
materiel ehangoe theeein.
flit ef the Pederal reserve banks (ostem. low York Riohmondo
Minneapolis and Kansas City) and Chaim.* AuStin of the Federal laserve
Dalk of PhiladelphIa euiselted material shangee.
The important question* 0)04 whioh ditrerences of aping.* devacw4
and the views expressed by the larious banks will be slmmarised below. In
inatekrialme, their slows on

these

questions, those banks which stated

generalAr that they're,* Matifified with the ciroglAr itna those which made
no *peeing oommeint oaths particular question being discussed will be
treated as favoring th,.. position taken in the draft oe July 16,

19.2ELWARP
Seetioa III of the draft of July le provided that Federal reserve
banks oould discount ter individuals0 partnorships or oorporations eligible
cemmeroial„ industrial and agricultural paper aei_j...a
.
..
raedbr such law
uala
dividusls, partuershipe

corploatioos and bearing their indorsement. I

left open the queltionwhethae 7eders4. reserve banks could sake direot
WITP°



•

imal

to individuals. pattnerehipe er eerporatlens, but the Federal

reserve banks apparently interpreted it as not permitting them to do so.
Ofttble points eight of the bank* (Gleveland. Riohnond, Atlanta,
Waage, St, Lode, Dallas and Bea Praneigeo) and Doputy Governor Nutt
(Philadelphia) favored the clingier as drama
Pour of the banks (Boston, hew York. Minneapolis and Zama*
Cr' And chairman Austin (Philadelphia) feared that the benefits of the
-11t 03123d be restrieted too svverely if the Federal reserve banks
were not permitted to make direat loans.
the Time or those who commented speeifically an this part are
summarised belosi
MOST014

We approve at letter omeept the words in Sea, III,

"aetually owned hy mob individuals, partnerships or oerparations and
bearing their indorsement*. Believe this should be eliminated because
°MAU loan *aortae, are about the only corporations that we can recall
at the mown* that mould be able to fUnationo

4-4 believe if we are to

Nestles in slaking loans direst that it will be necessary for borrowg
to set up oerporatiens with capital etas* main business will be indorsing.
NV Tab Seetios three, paragraph one, would operate id Unit
eligible paper tø the notes receivable of the borrow. au.thiS
will probably be desirable in most oases, it would appear to be ump
necessary and perhaps unwise to Is Unit paper wide* een be ameepted,




R/CIMOIDI Section 20 Legal Dequirements.— Subsection 2 states

IJ

a
•

••

J•

•

a•

that the Pedcrol Reserve Minks =my dieeOunt ter individualSo partner*
ships or corporations only notes. drafts and bills of eschan6.0 of the
time.* and maturities nade eliGible tor discount for womb-Jr banks. etc.
In tads 04$0. under the present Aot amber banks' own notes areeligi.
blo for disocuuto whereas under 3ectien Ins subornation I of the Board's
memorandum° 4211gibillW° the direct obligations of indiviOuals. part*
nerships or eorporations# was a endorsed or seoured. are not made all.
giblea but only the business peva. actua14 awned by audh
Indivithelles
partnerships or corporations bearing their endorsement and secured iS
made eligiblo• YrankIy.wo should prefer to hum the Board's memorandum main as it is beeaussi capitol leans arm under Section?' of the
Sotrets 7,Jemorandum. subsection 50 prohibitld o and it would not be possible for all$ individual° firm or oerporation to obtain a oapital loan.
dirookly or indireotly under &motion tlIo utioh makes eligible only paper setually owned by applicants. nevertheless. tThs oonment seems °ailed
for*
0,

:r oareut consideration end eonsulting with

coumceI it is out understanding troll both the aotjand regulation'
VI:a we limy rediscount for individuals. partnerships and corporations Quay
such eligible paper of others which thqy ney own and ender:1m tbe e5.ms
as we nos redisount for member banks their own paper endorsed by them
this would preolude our taking direct Trentham their note*
Signed
ay themselves as their eomasrelat banks would de• le also understan

d

eligible mar does not baud* typO of toans provided by Olass..3te
agall
Bill and that Apar *doh wean rediseount as above mr4 be available
to secure eurrenoy iseums, If clu. unetarstandim; as outlined abva



•
•
•

de"
•I•

44.

wrest no think proposed regulations are in satisfactory for*.
WAPOLDIs Motion 5 regarding eligibility says paper =et
be setually owned by the individual1 partnership or corporation offering
it1 which would

804311 to

limit offerings to concern* like agricultural

ercdit corporation and livestock lean companies. There might be a
night be unable te

situation where a eanrina factory in a moll to

sot the neeessary credit to peek LAd carry their peas and corn. They
eould however, offer us their note with the endoreovent of the direutors
and **cured by warehouse receipts for canned go040; in storage& which mould
Monk to eome under the terns of the act and yet would not be paper actually

amid by the endorsee who night offer
ZAIIAS 022fs It is the opinion our counsel that tentative
draft proposed valvular X.4801a oorreetly interprets elaesimmaimsat
providing for dismounts for Individuals partnerships end corporationS
under strict eonetruction at the amendment in the 116ht of the provision*
of the Federal Reserve Aft which are emended and the Act of which it is
4 pertsbut that standing *lane the act would permit of oonstruction author.
Wog 'arena* direst to borrowers of the *lasses mentioned' Debates in
Cien.:rolis and promoting' Won/ Ofalattele OW the amendment not yet
available here but it is our underetanillas that Congress Intended to

•

ftuthoritie &treat loans whore credit not available through oemmorei4
banks or other credit Manna*, the pro-vision

or

the sot which reeds

"When such notes, drafts and bills of *whinge are endorsed and Otherwise *soured to the satiotaetien of the Federal Reserve lamVe should ba
interpreted to mean° in our opinion, it the same is at all permiesables
'When such notes1 drafts and bills of exchange am* endorsed or otherwise




•

3.•

•

•

secured to the satisfaotion ot the Federal Reserve BArk". Otherwise
ordinary commercial and industrial loans as a practical natter oannot
be rediamounted at the Federal Reserve Banks for the reason that industrial
and commercial corporations in the main have no security to pledge even .
though their financial statements may entitle them to credit. Suoh concorns could probably furnish accommodation endorsers and we consider
the final test should be whether such notes are eligible and are good
and
collectible° We beliwie the =,:entative dratt of the circular wnuld
make

1

the act almost wholly inoperative in this diwtrict except possible for
livestock and agrioultural loans throuch cattle loan companies or other
such organisations. With funda *mailable thro101 the intermediate oredit
banks and the RFC it should be possible for the latter class of loans to
be
handled as satisfactorily as could be dens under the protisions of this act(
)
The suggest3d oonstruotion of the words nand otherwise seoured" might be
justified on the theory that the loan is otherwise *soured if in. addition
to bearing an endorsement it ia accompanied by a satisfactory finande
l
s'Fatemente

In shaft we believe that as an aid to commerce. industry and

agrisulture this aot is a mere gesture unless there aan be read into
it
an intent on the part of Congress that loans may be made direct when the
paper is endorsed even though by an accommodation endorser and further
in any event that a oonstruction of the words "and otherwise
secured" vbioh
requires a pledge of or a lien= property will largely deprive
commeroe
and industry of the benefits of the act°




(Soo alternative substitute for Sectian III)

wommo BOTH INDOESEMZET

AND

swum!

See Governor Hamilton's telegramwhich is quoted in full above.
No one else obj7,cted to this requirements, which is contained in tile law
itself. This is not one of the rare oases where "and" can properly be
oonstrued as neaning "ern°

MING PROCEEDS TO PAT OFF /IDEBTEDRESS0
The Federal Reserve Bank of Minneapoliso Chairman Austin Mil..
adelphia) and Messrs. Goldenweiser and Snead question the advisability of
the provi3ion in Section V (po6) es the draft of July 16o which forbade
Fatima]. reserve banks to discount paper for individuals* partnerships or
corporations if the prowled* are to be used to pay off existing indebted..
ness to other banking institutionsg and the revised draft (Sec. III, p. 4)
modifies this prohibition by inserting thewordso "Except with the permission
of the Federal Reserve Boareo
Tho colrnients were as follows;
GOLDENWEISERe

I az inclined to question the absolute pro.

hibition of borrowing under this proviso for the purpose of Mb* off
existing indebtedness. While ordinarily suoh loans should nob be granted,
aircumstances might arise where& bank is pressing a firm forremment of t
loans and this is threatening failwre to the firm. I should think that if
all other circumstances are all right, tha Federal reserve bank might very
well be permitted to grant a loan to such - a firo.
MR. WAD: In the uaragraph on page 6 relating to the purposes for
which the proem/44s of the discounts are to be used It is stated that they
mut not be used for the purpose of pking off existing indebtedness to
ether bankinz institutions. While this in gneral is no doubt a good pro


•
ae rie*

vision* 1 =wondering whether it is

Vi30

to close the door against all

such loans. Might there not be instances where the granting of such loans
may be in the best interests of the oormunity?
XINNEAPOLIS8

We feel too that the provision that loans cannot

be made to pgy off existing indebtedness is too drastic. Cases might arise
where it wyuld be advisable to make a loan to pay off a receiver of a closed
bank: who would otherwise sell the debtor outo
*". =TM

As the paper's) might discount would be what is so-

of
called "self-liquidating paper" that is such paper would be obligations
not
other parties and fora a part of the capital of the borrower, he would
have to provide for its payment, and we do not see why there wculd be
any objection to allowing the proceeds of such paper to be used for fixed
invlstment or other capital purposes* or even liquidating indebtedness
to other bankan which banks might be pressing the borrower for payment.
,
The intended purpose of the Act is to provide moans for stimulating business
y
starting up factories, etco and in such cases it probably would be necessar
to make some expenditures for capital purposes or other fixed investments*
and we cannot see any objection to so using sone of the proceeds of such discounts.

RATE OF DISCOUNT.
The following are the only comments on this subject, except
a comment by Governer Seay regarding a natter of prooedures




OOVENNOR WD0UGAL8

In respect to interest ratca to be charged on

.4

t. •

04.

discounts it is important that consideration be given to the fact
that the average borrower from& commorsial bank is expeoteJ to maintain
a deposit balance. Under thee* circumstances the minimum rate charged by
Federal Reserve Badks should be kept at least a fraction higher than
prevailing counter rates otherwise borrower wovld 2r..vo) a preferential
rate here.
Incori=daction with toot/our/ way we assume in

BAN FRAI3CO

view of widelmriatical Ia twelfth district in interest rates for came
class of paper board would approve a 2% spread between nin3.3=1 and

MillaiMaR

discount rates.
DR. QOIDiwisISR

I a3a inclined to think that the rate of

interest should always be somewhat higher than the prevai1/11g rate an the
same class of paper,

PERMISSION OF FEDERAL RESERVE BOARD.
There were some helpful suggestions regarding the phrassolou
of Section 14 but the following are the oriy comments on matters of
substance
GOVERNOR Sage

Sub-sootian I states that permission to a hoderal

Reserve Bank sea only be granted upon 'written or telegraphic application
of a Federal Reserve Bank, containing a full statement of the unusual
and exigent circum0Wummit'Ai& in the judgment of the Board of Directors
of the Federal Reserve Bank Austifiss such action. In the ease of this
bank, and of some other Federal Reserve; Bank, directors' meetings
sewer only *ace a month, and unless a wpocial meeting of the directors
of this bank is called (their monthly meeting having just been held), this



br.mk would .aot be ab3.6, to aot
and. in the
as ..

•Ute me..tar :.'"Qr a mont3-... i'rcra Vnia

ti.'.,-,refore not be ablo
f'or

issue k.vay otroulare

SP-sti on VIII rif the r Jard
'
a ,....nnoa%icylt.ar..

:e7r.....E.sAcuo::-... es thi, alc:r.td-Inont -to 1,-,:La Aei;
and 3.311katni.tti`.,

S X.14"

Oil

a porin9.1.,

ion.*

4-ituation are well k3.1:17. L

Air3

and unrs!-- ;odo Itac inach a.a ell letal

.rve Banks Is good fae.th

are atIld Ivor to tot

moald sem that uncli,r

aniendnonts

s.xiatL„,?,

...501ar

Y.,..),
Ar be

it$nd

R Sere* Banks -thritr.z7;1.
quats

:::emor:4 as to the tu.1.12.attai

extes.

applioptior. of a Federal

or

C;oisalt-:;eao alie;ht• be ate-

;:ais
LIZS k

ra

•
r ,133.15 es a f

"Vij

Wh.1
- 1v pia.afTaph
oon4iLaer

sta

ux.o,;-! zv.7.

SIVIS th.e

741.11 not tuulartf..

ti us tha'.; the u.r•lante-1. dad. Jxigant

eiroume-IA.a.Ges

E4Z,

slAnsc alvityz ir

1.:141T-f,c1.-..a2. Gases ratheT

.1..han.
-.
with th4

rot

marg.

oeu.v1;t1 hat;

7`f" t".'-./27:'

".!le?,:laalary




o

.

;:

raw-.

-

Ard.
and.

be

dilks

tA.S
.-";

are inte-r.ded.

t17.11,t the Fitrita'.-..-.1 reserve .b..nka
-t* the, tiwsar.
•

T4at'z
Generel, Cotrazelo

ir. the light:

.3i
Office Correspondence

Form No.

TO_

Mr. Hamlin

FEDERAL RESERVE
BOARD

Subject:

From Mr. -,4-yatt General

Counsel.

Date

July 22, 1932

Glass Amendment to so-called

relief bill
•PO

Dear

2-8495

Hamlin:
The following information -with reference to the Glass

Amendment

to the bill to authorize supplemental appropriat
ions to

provide Federal aid in connection with the const
ruction of &Late
highways (H.R. 9642, 72nd Congress, 1st Sessi
on - now known as the
"Elmergency relief and construction act of 1932"
), is furnilph d to
you in response to the request contained in
7our memorandum of July 19,
1932.

This act, which amends Section 13 of the teder
al

Reserve Act,

was siTned by the President on July 21, 1932,
and is now known as
Public Act No. 302.
As originally introduced by Senator Glass on July
11, 1932,
his amendment to H.R. 9642 provided as follo
ws:
"In unusual and exigent circumstances the
Federal Reserve Board, by the affirmative vote
of not
less than five members, may authorize any Feder
al
reserve bank, during,such periods as the said
board
may determine, at rates established in accor
dance with
the provisions of section 14, subdivision (d),
of this
Act, to discount for an:: individual or corpo
ration,
notes, drafts, and bills of exchange of the
kinds and
maturities made eligible for discount for membe
r banks
under other provisions of this act,' when
such notes,
drafts, and bills of exchange are indor
sed and otherwise

VOLUME 230
PAGE 137



secured to the satisfaction of the Feder
al reserve bank:

•

11

•
-2-

"Provided, That before discounting any such note, draft,
or bill for an indi-idual or corporation the Federal reserve
bank shall obtain evidence that such individual or corporation
is unable to secure adequate credit accommodations from other
banking institutions.

All such discounts for individuals

or corporations shall be subject to such limitations, restrictions, and regulations as the Federal Reserve Board
may prescri-oe.

No note, draft, or bill of e7change dis-

counted under the provisions of this paragraph shall be
eligible as collateral security for Federal reserve notes."
On the saare day, Mr. Wagner, Mr. Robinson oce. Arkansas, Tam. Pittman,
L'r. Walsh of flontana, and /L-. Bulkley, proposed another amendment in the
nature of a substitute for the bill as passed by the House, and, included
in that amendment was a section which provided precisely the sane as that
contained in the amendment of Senator Glass, except for two unimportant
changes in punctuation and except forthe inclusion of the words "of e,:Lchange"
the
after the word "bill" in the language imiaediately follaning/proviso clause.
As passed by the Senate on July 12, 1932, except for inserting the
words "For a T)eriod of) two years" before the words "In unusual and exigent
circumstances" and except for one immaterial change in punctuation, this
section read exactly the same as that contained in the amendment of Lessrs.
Wagner, Robinson, Pittman, Walsh and Bulkley.
As agreed upon by the conference committee, which, of course, is
also the form in which it finAlly passed Congress, this section reads as




•

•

_3_

follows (the part shown in capital letters being new wording inserted
in the Senate provisions and the part stricken through being wording
omitted therefrom):




"i2op-a-14ope4-eP-4we-yeaPe In unusual and exigent circumstances, the Federal Reserve board, by the affirmative vote
of not less than five members, may authorize any Federal reserve
bank, during such periods as the said board may determine, at
rates established in accordance with the provisions of section
14, subdivision (d), of this Act, to discount for any individual,
PARTNERSHIP, or corporation, notes, drafts, and bills of exchange
of the kinds and maturities made eligible for discount for member
banks under other provisions of this Act when such notes, drafts,
and bills of exchange are indorsed and otherwise secured to the
satisfaction of the Federal reserve bank: Provided, That before
discounting any such note, draft, or bill of exchange for an
individual or A PARTNERSHIP OR corporation the Federal reserve
bAnk shall obtain evidence that such individual, PARTNERSHIP, or
corporation is unable to secure adequate credit accommodations
from other banking institutions.

All such discounts for indi-

viduals, PAPT;ERSHIPS, or corporations shall be subject to such
limitations, restrictions, and regulations as the loederal
Reserve 3oard may prescribe.

4e-ne*ey-dPaty-P-1311-ef=-emeliaRge

di.seeRE4ed-linder-tke-pPeveleRe-ec-4kio-paPagFaph-skall-be-eligil4e
as-eel4qt*epal-seewPity-LgeP-i:edepal-peserve-no*se."

•••2
1.111

In short, the legislative action upon this amendment may be
described as follows:

As orizinally introduced by Senator Glass, the

amendment permitted the Federal Reserve Board, in unusual and exigent
cumstances and upon the affirmative vote of not less than 5 of its members,
to aut orize the Federal reserve banks to discount for any individual
or corporation paper eligible for discount for member banks under the
Federal Reserve Acts if such paper was indorsed and otherwise secured
I o the satisfaction of -the Federal reser-Ye bank.

It was also provided

that the discounts were to be made only where the individual or corporation
was unable to secure adequate accommodations from other banking institutions and that no paper so discounted should be eligible as col2ateral
security for Fecleral reserve notes.

The bill as passed by the Senate on

July 12, 1932, incorporated Senator Glass' amendment but limited the
authority to discount :paper for individuals or corporations to a period
of two years.

The bill as agreed to in conference and as finally passed

by Congress retains the substance of the Senate provisions, but extends
the discount privilege to partnerships as well as to individuals and
corporations, removes the two year limitation and eliminates the provision
that the paper so discounted should not be eligible as collateral security
for Federal reserve notes.
I am also attaohing for your further information a copy of your
original draft of this pruvision and a copy of 1:!r. Vest's revision.




R:spect ully,

'Walter
Gene




•

•
July 9, 1932.

Mr. Hamlin's Draft.

Proposed amendment to Section 13. Federal Reserve Act :

The second paragraph of Section 13 of the Federal
Reserve Act is hereby amended by adding the following :

"The Federal Reserve Board, by an affirmative
vote of five members, in times of emergency, is
hereby given the power to permit Federal reserve
banks, for such periods as it may determine, to
discount paper eligible under the Act directly
for individuals or corporations said paper to
have a satisfactory indorser but without requiring an indorsement of any bank, said paper to
be subject to the maturity and other limitations
now prescribed by said Act. The Federal reserve
bank, before discounting any such paper, shall
satisfy itself that the borrower can furnish
satisfactory collateral and that it is unable
to procure a loan from a member bank, and, on
passing of the emergency, shall revoke its consent
as to any future loans under this provision. "

A




Mr. Vest's Revision.

BE IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES OF THE
UNITED STATES OF AMERICA DI CONGRESS ASSEMBLED, That Section 13
of the Federal Reserve Act, as amended, is hereby further amended
by adding at the end of the second paragraph thereof

a new para-

graph reading as follows:

" In unusual and exigent circumstances, the Federal Reserve Board, by the affirmative vote of not less
than five members, may authorize any Federal reserve
bank, during such periods as the said Board may determine, at rates established in accordance with the
provisions of section 14, subdivision (d), of this Act,
to discount for any individual or corporation, notes ,
drafts and bills of exchange of the kinds and maturities
made eple for discount for member banks under other
provisioS s of this Act,when such notes, drafts and bills
of exchange are indorsed and otherwise secured to the
satisfaction of the Federal reserve bank; provided, that
before discounting any such note, draft or bill for an
inSividual or corporation the Federal reserve bank shall
obtain evidence that such individual or corporation is
unable to secure adequate credit accommodations from
other bankinginstitutions. All such discounts for
individuals or corporations shall be subject to such
limitations, restrictions and regulations as the Federal
Reserve Board may prescribe. No note, draft or bill of
exchange discounted under the proons of this paragraph shall be eble as collateral security for Federal reserve notes. "